Mellanox was the latest stock added to the SOX index a few weeks ago after NVLS disappeared after the merger with LRCX was completed. At least for now, the powers that be that control the SOX index have decided on 30 stocks as the right number for the index. With NVLS gone, MLNX was added.
MLNX's 2nd quarter report this past week "blew away" the estimates sending the stock up about 40 percent on Thursday. The following is the front page writeup on MLNX on Thursday by IBD
Mellanox Leaps 50% On Blowout Q2 Profit, Sales
Thu, Jul 19 2012
By PATRICK SEITZ
news.investors.com
Mellanox Technologies ( MLNX) late Wednesday obliterated second-quarter estimates on strong sales of its high-speed interconnect products for servers and storage system, sending shares exploding to new highs.
The Israel-based company earned 99 cents a share, excluding items, on sales of $133.5 million. Analysts polled by Thomson Reuters had expected Mellanox to earn 74 cents a share on sales of $128.3 million. EPS leapt 267% vs. a year earlier while sales jumped 111%.
"They absolutely crushed it on every line," said Wunderlich Securities analyst Brian Freed. "It was a fantastic quarter."
Mellanox also guided Q3 sales estimates sharply higher.
Its shares skyrocketed 50% in late trading to 99.76, soaring past the July 5 intraday high of 77.69. The stock rose nearly 7% during the regular session, snapping an eight-day losing streak.
Adjusted gross profit margin rose to 70.5% from 70% in Q1 and 68.9% a year ago.
'Virtual Monopoly'
Mellanox is benefiting from the expansion of its leading InfiniBand technology beyond high-performance computing and into enterprise and data center uses. Cloud computing, Web 2.0 and "big data" analytics are key drivers for the company because they are areas where increased data speed is critical.
Mellanox leads in this market and enjoys a "virtual monopoly," says ThinkEquity analyst Rajesh Ghai. It's likely to have the market to itself for at least the next year, Ghai says. Mellanox can move data as fast as 56 gigabits a second and is testing 100-gigabit-per-second products.
Intel A Customer
In June, Intel ( INTC) chose Mellanox's ConnectX-3 FDR InfiniBand adapter silicon for upcoming server products. Intel had been seen as a potential competitor because of its acquisition of QLogic's ( QLGC) InfiniBand assets. But QLogic's products are considered a generation behind what Mellanox offers, analysts say.
Intel has made a lot of investments in high-performance computing over the last 12 months, "but they're reacting late to a trend that Mellanox got in early," Freed said. Intel's investments show there are sustained opportunities in the sector, "where Mellanox is already driving a lot of success," he said.
In a conference call with analysts Wednesday, Mellanox CFO Michael Gray said the company expects third-quarter sales of $150 million to $155 million, well above analyst forecasts. Mellanox is targeting a gross profit margin of 70% to 71%, he said.
Analysts had been modeling Mellanox to earn 52 cents a share, up 68% vs. a year ago, on sales of $105 million, up 54%, for Q3.
"We benefited from growth in (high-performance computing), Web 2.0, storage, database, cloud, big data and financial services markets," Mellanox CEO Eyal Waldman said in a statement. |
